How sports teams can avoid significant fines for public sector funding for stadium development

When sports teams are planning to build a new stadium or upgrade their existing stadium, they may, as part of the construction, aim to provide more space to the city where they are located to conduct other entertainment events, the benefits of which extend to the wider public. These types of projects also provide economic several benefits such as employment and work for several other sectors like construction, equipment, materials, etc.  With the significant costs involved in the construction, the owners of the stadium may turn to a local public authority or national government to provide subsidies in the form of tax rebates, grants for the buying of materials, the renting of trucks, cranes, etc.

However, when such projects are undertaken in the European Union (“EU”) there is a risk that the sports team may have to pay a significant fine if these subsidies provided by the local authority do not comply with EU State aid rules; which aims to prevent EU Member States (and any of the public bodies that emanate from the State) from distorting the economy and damaging integrity of the internal market (Article 107(1) of the Treaty on the Functioning of the European Union), for example as offering financial support at lower rates than would obtained in the private sector.

This article sets out some practice guidance:

1. Why a State aid rules should be front of mind for sports teams in the EU who are developing a stadium;
2. What action should be taken to prevent retrospective fines;
3. A case study of the recent case in Norway which illustrates the problems that may arise from State aid rules.

Article Outline

• The starting point
• How to get public funds in accordance with EU State aid rules
• Avoiding the qualification of state aid
• Complying with the Market Economy Operator Principle
• Obligations to report & competitor complaints
• Public private partnerships and State aid exemptions
• General Block Exemption Regulation
• Compatibility - GBER for sport infrastructures
• Norwegian case study
• Conclusion

For the purposes of this article the authors use a football club as a typical example.